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With the coldest months of winter still ahead, the government said Fri

January 3, 1997

WASHINGTON (AP) _ With the coldest months of winter still ahead, the government said Friday that heating oil prices will stay high _ up 10 to 15 cents a gallon from last winter. And motorists next summer should brace for the same high gasoline prices they saw last year.

Despite a mild December in the Northeast, where oil is most widely used for residential heating, fuel stocks remain below normal and prices high with a $1.16 a gallon average at Christmas time. That was almost 20 cents a gallon higher than the same time a year ago.

Assuming normal weather for the first quarter of the year, prices are likely to ease during the first quarter of 1997, the Energy Department said. But the cost of heating oil on average still is expected to be about $1.06 a gallon for the quarter, or 10 cents higher than in the same period a year ago. If it gets unusually cold, prices could rise an additional 5 to 6 cents.

Although stocks have increased in recent weeks, Jay Hakes, head of the DOE’s Energy Information Administration, said they are still 6 percent below normal. He said prices are being kept high because of strong demand for both heating oil and diesel fuel, both of which are distillates.

The demand for diesel has been especially strong because of the healthy economy. A cold winter in Europe also has kept demand, and prices, high both in this country and across the Atlantic, Hakes said.

During the past three months, heating oil cost on average $1.05 a gallon, 16 cents more than in the fourth quarter of 1995, said the EIA. But in some areas prices have been much higher.

In Bristol, Conn., consumers have been paying from $1.09 to as much as $1.26 a gallon for heating oil, said Rose Bourgoin, who runs the low-income energy assistance program in the community 35 miles west of Hartford.

``More families are feeling the crunch this year than ever before,″ she said in a telephone interview.

A family of four with an income of $23,400 can get $150 for fuel oil under a federal assistance program. But with the high prices, even if a family watches the thermostat, $150 worth of oil heats a home only for about three weeks, she said.

For some elderly ``it’s either food, medicine or fuel,″ said Bourgoin. She said if there is a bad winter, some people might have to abandon their homes and move to shelters because they cannot meet heating costs.

Hakes attributed the continuing high cost of both gasoline and heating oil to higher-than-expected crude oil prices and the industry’s practice of keeping inventories low in anticipation of lower crude prices in the future.

Crude oil stocks have been ``at a historic low″ for this time of year, Hakes said. The Energy Department is looking into the industry’s inventory practices which are designed to save tens of millions of dollars in crude oil storage costs.

Such inventory controls were blamed in part last year for the surge in gasoline prices in the spring and early summer when prices at the pump jumped 20 cents or more a gallon almost overnight.

Last month, the American Automobile Association called on the Energy Department to set minimum inventory levels for crude oil and petroleum products such as heating oil and gasoline, saying that gasoline inventories had slipped to precariously low levels.

``Low inventories have a direct effect on consumers,″ Robert Darbelnet, president of AAA, wrote Energy Secretary Hazel O’Leary, fearing the possibility of another run up of gasoline prices this spring. O’Leary has said the government should not interfere in the petroleum market.

The AAA said that in mid-December its survey showed regular gasoline at almost $1.28 a gallon, the highest for December in six years. The Energy Department, using a different survey, put the average price of regular at $1.22 at the end of December, compared to $1.08 a year earlier.

Hakes said gasoline stocks are lower than normal and that refiners are expected to step up production this month.

The EIA predicted that during the peak driving season this coming summer gasoline likely will be about what it was last year on a nationwide average _ about $1.36 to $1.38 a gallon for all types, and $1.29 cents a gallon for regular self service, about what it was last summer.

On the plus side, the high prices may not be as noticeable since prices already are much higher than they were during the winter of 1995-96, said Neil Gamson, an EIA researcher.

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